Question

Mr.​ Beautiful, an organization that sells weight training​sets, has an ordering cost of ​$45 for the​ BB-1 set​ (BB-1 stands for Body Beautiful Number​ 1). The carrying cost for​ BB-1 is $20 per set per year. To meet​ demand, Mr. Beautiful orders large quantities of​ BB-1 7 times a year. The stockout cost for​ BB-1 is estimated to be $45
per set. Over the past several​ years, Mr. Beautiful has observed the following demand during the lead time for​ BB-1: Demand During Lead Time Probability
Value 1 10 0.1
Value 2 30 0.2
Value 3 50 0.2
Value 4 70 0.2
Value 5 90 0.2
Value 6 110 0.1

The reorder point for​ BB-1 is 50 sets. What level of safety stock should be maintained for​BB-1?
The optimal quantity of safety stock which minimizes expected total cost is nothing ______

Answer 1

Answer:

839.216

Explanation:

For we to calculate the total cost, we use the following

Total Cost = Carrying Cost + Stock out Cost

= 0+ $45 x 4 x [.2(100-80)+.2(120-80)+.1(140-80)] = 1368*

Now

Total Cost = Carrying Cost + stock out Cost

Total cost= [10 x 20]+40 x 4 x [.2990-50-20)+.1(110-50-20)]

Total cost = 200-1115.216+4

Total cost = 839.216